It allows to select between multiple wallets within the datadir. e.g. bitcoin -wallet=foo.dat will load $DATADIR/foo.dat (or create it if it doesn't exist). Don't use it to access wallets outside the datadir.
Er. This doesn't split the database environment, so if its used as this thread is requesting it will almost certainly result in wallet corruption. (and leak wallet information as well).
Any update to whether this feature was incorporated into the main client? Last update to the thread was nearly a year ago, and it looks like tcatm did a patch for it.
I am considering using the symlink option, but it seems a little dangerous.